What is the purpose of the liquidated damages clause in a local purchase order?
Liquidated damages clauses are used when it is difficult to determine the extent of damages that would result from a breach of the contract. Therefore, in the contract (or here, purchase order), the parties agree before hand the exact amount one party would owe the other party if the contract is breached. That way, the parties do not have to fight over the extent of the damages because they “agreed” up front what damages would be necessary to “make the non-breaching party whole” in the event one party breaks the contract.
